T-Mobile defends Verizon spectrum swap as way to enhance LTE network

T-Mobile USA is urging the FCC to approve Verizon Wireless' (NYSE:VZ) $3.9 billion deal to acquire AWS spectrum from SpectrumCo (a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks) and Cox Communications, since the deal will set in motion an AWS spectrum swap between Verizon and T-Mobile. T-Mobile argues that the deal will allow it to more robustly deploy LTE service than it otherwise would have been able to do.

In filings with the FCC, T-Mobile disclosed that its top executives met last week with FCC Chairman Julius Genachowski and other top officials. The executives discussed the spectrum swap and also rejected arguments from the Rural Telecommunications Group, which claimed the swap wouldn't result in the benefits T-Mobile believes it will.

The filings indicate that the lobbying over the deal is not done yet, even though it is likely to be approved later this summer. They also show how badly T-Mobile wants the AWS spectrum from Verizon--the deal covers spectrum 218 markets across the country and T-Mobile has said it will expand its offerings to 60 million more people.

According to T-Mobile's filing, Jim Alling, the interim CEO of T-Mobile, along with Tom Sugrue, senior vice president of government affairs, and Kathleen O'Brien Ham, vice president of federal regulatory affairs, met on July 25 and July 25 with Genachowski and other top FCC officials. Alling noted in his meetings that the spectrum "will enable T-Mobile to deploy LTE services in a number of markets where such deployment would otherwise have been impossible, and to enhance its LTE service in a number of additional markets where T-Mobile would have otherwise been limited to a 5x5 MHz LTE deployment."

In a separate filing, T-Mobile pushed back hard against a filing from the RTG earlier this month. The carrier said the swap will allow T-Mobile to compete more vigorously and that the swap resolves the competitive concerns T-Mobile had earlier about Verizon's cable deals. In addition to reiterating Alling's point, the second filing noted that the swap will allow T-Mobile and Verizon "to create more contiguous blocks of spectrum and re-align spectrum in adjacent markets," which will improve network performance and benefit customers. The filing also said the swap will not leave Verizon with too much AWS spectrum concentration.

T-Mobile said that although the swap will result in a net transfer of AWS spectrum to Verizon Wireless in 17 CMAs in the western United States (10 MHz in 14 CMAs and 20 MHz in the other three), T-Mobile will retain sufficient AWS spectrum in all of those markets to be able to deploy LTE at 10x10 MHz.

The RTG, in its filing, lambasted the swap as a way for Verizon to essentially buy off one of its most vocal opponents of the deal. Approving the swap "does precious little to limit the spectrum aggregation and anticompetitive practices of Verizon. Nor does approval of those applications necessarily make T-Mobile a stronger market player," the RTG wrote in its filing, dated July 10. "What the announced deal does accomplish, however, is to distract consumers by drawing their attention away from the new axis formed by the Cable Companies and Verizon and the hyper-concentration of spectrum in the hands of Verizon. This sale-and-swap between Verizon and T-Mobile was designed to mimic a large, voluntary divestiture when it in fact does nothing more than buy the silence of a once vocal critic of Verizon's transaction with the Cable Companies. Verizon is giving up little of its spectrum depth and the deal with T-Mobile addresses zero of the anticompetitive concerns raised by dozens of parties, including RTG."